Amazon rushes to kirana stores to take on RIL's 'new commerce' plans

Amazon Distribution offers retailers services that will include GST invoices, competitive rates, and managing back-end inventory.

Amazon India seems to be gearing up for the impending e-commerce battle with Reliance Industries (RIL) by systematically adding its own set of kirana stores. As part of this strategy, the e-commerce major has launched a programme to manage the entire business-to-business (B2B) inventory supply and management for neighourhood kirana stores in three cities in Karnataka, before taking it pan-India, sources in the know said.

“Presently, the company has launched the project in three cities in Karnataka — Bengaluru, Mysuru, and Tumakuru. Amazon has consolidated everything under the Amazon Distribution marketplace. Retailers and kirana store owners can order online, and products are delivered to their doorstep the following day,” said one of the sources.

Amazon Distribution division handles the B2B side of fast-moving consumer goods and other products business with retailers and kirana store owners.

The company is going to offer a whole bouquet of services that will include goods and services tax (GST) invoices, competitive rates, and managing back-end inventory.

Just like RIL, Amazon is also fine-tuning and perfecting its online-to-offline (O2O) strategy. The US-based retail giant is running another pilot and has deployed B2B executives on ground who would reach out to retailers and small businesses. The idea is to make these retailers order inventory online on the Amazon Distribution division.

Why kirana stores?

The answer for Amazon and RIL lies in habit formation, according to Paula Mariwala, founder, Stanford Angels & Entrepreneurs. She explained that it has a lot to with demand. Grocery follows a pattern and India still shops at mom-and-pop grocery stores, and that’s where demand consistently rises.

Historically, these neighbourhood kirana stores have been averse to the use of technology and have enjoyed the anonymity of not having formal inventory management software.

This may be the time when Amazon uses its captive audience to boost its use cases and generate a steady supply of orders.

RIL takes its time to perfect the model

While there have been reports that the company has launched a few pilots, sources close to the company said that RIL is not in a rush to launch its ‘new commerce’ business. The company is experimenting with various technologies, business strategies, and is hitting the drawing board from time to time to ensure it does not get it wrong.

“A lot is in the planning and formulation stage. It has not rolled out its point-of-sale (PoS) machines on a large scale. The actual beta-testing is going to happen in a few months,” said a source close to the firm.

Available at a refundable security deposit of Rs 3,000, these PoS machines would help retailers hook up to RIL’s larger retail ecosystem from where they order inventory, accept all kinds of digital payments, get database of regular consumers, be part of Jio’s offers and awards programme, as well as secure easy short-term loans.

The company is also giving a 56-day free data pack with the device. This would also help RIL manage the inventory of each and every merchant on their platform.

Same target, different strategies

“RIL doesn’t copy business models, it picks and chooses what works for them,” said Arvind Singhal, chairman and managing director, Technopak. He said that though both Amazon and RIL are inherently facing off in the same market and the same set of customers, the methods are different. “You can’t compare Amazon’s O2O with Jio’s O2O,” adds Singhal. 

He says that there are close to 20 million kirana stores in India. These stores will work as a correspondent, which will do last-mile deliveries, accept orders, and be the central hub for everything that a customer wants from RIL.